Sunoco 2015 Annual Report Download - page 75

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The Partnership also adjusted its balance sheet presentation of deferred tax assets and liabilities in response to the early
adoption of ASU 2015-17. This guidance requires all deferred tax assets and liabilities to be presented as noncurrent within the
consolidated balance sheet, and is retrospectively applied to all prior reporting periods presented. This change did not impact
the Partnership's financial position or results of operations.
In May 2014, the Financial Accounting Standards Board ("FASB") codified guidance in ASU 2014-09 related to the
recognition of revenue from contracts with customers. The new guidance outlines the core principle that an entity should
recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration
which the entity expects to be entitled in exchange for those goods or services. The guidance is effective for annual reporting
periods beginning after December 15, 2017, including interim periods within those reporting periods, with early adoption
permitted. The Partnership is currently assessing the impact, if any, that adoption of new guidance will have on its consolidated
financial position and results of operations.
Revenue Recognition
Pipeline revenues are recognized upon delivery of the barrels to the location designated by the shipper. Acquisition and
marketing revenues for crude oil, NGLs and refined products are recognized when title to and risk of loss of the product is
transferred to the customer. Terminalling and storage revenues are recognized at the time the services are provided. Revenues
are not recognized for exchange transactions, which are entered into primarily to acquire a commodity of a desired quality or to
reduce transportation costs by taking delivery closer to the Partnership's end markets. Any net differential for exchange
transactions is recorded as an adjustment to cost of products sold in the consolidated statements of comprehensive income.
Affiliated revenues are generated from sales of crude oil, NGLs and refined products, as well as pipeline transportation,
terminalling and storage services to ETP and its affiliates. Sales of crude oil, NGLs and refined products to affiliated entities are
priced using market-based rates. Affiliated entities pay fees for transportation or terminalling services based on the terms and
conditions of established agreements or published tariffs.
Cash Equivalents
The Partnership considers all highly liquid investments with a remaining maturity of three months or less at the time of
purchase to be cash equivalents. At December 31, 2015 and 2014, cash equivalents consisted of time deposits and money
market investments.
Accounts Receivable, Net
Accounts receivable represent valid claims against non-affiliated customers (see Note 4 for affiliated receivables) for
products sold or services rendered. The Partnership extends credit terms to certain customers after review of various credit
indicators, including the customers' credit ratings. Outstanding customer receivable balances are regularly reviewed for
possible non-payment indicators and reserves are recorded for doubtful accounts based upon management's expectations
regarding collectability. Actual receivable balances are charged against the reserve when all collection efforts have been
exhausted.
Inventories
Inventories are valued at the lower of cost or market. Crude oil, NGLs and refined products inventory costs have been
determined using the last-in, first-out method ("LIFO"). Under this methodology, the cost of products sold consists of the actual
acquisition costs of the Partnership, which include transportation and storage costs. Such costs are adjusted to reflect increases
or decreases in inventory quantities, which are valued based on the changes in the LIFO inventory layers. The cost of materials,
supplies and other inventories is principally determined using the average-cost method.
For the periods ended December 31, 2014 and 2015, a lower of cost or market ("LCM") adjustment was applied to the
Partnership's crude oil, NGLs and refined products inventories due to the decline in market prices. Write downs are calculated
based upon current replacement costs.
See Notes 6 and 18 for additional information on changes to the Partnership's inventory pools in connection with the
realignment of its reporting segments and related to the LCM reserves and their impact to the Partnership's net income.
Properties, Plants and Equipment
Properties, plants and equipment are stated at cost. Additions to properties, plants and equipment, including replacements
and improvements, are recorded at cost. Repair and maintenance expenditures are charged to expense as incurred. Depreciation
is determined principally using the straight-line method based on the estimated useful lives of the related assets. For certain
interstate pipelines, the depreciation rate is applied to the net asset value based on the Federal Energy Regulatory Commission's
("FERC") requirements, which approximates the estimated useful lives of the related assets.